BHP Billiton in the Black But Will Sell US Shale

The Australian energy company BHP Billiton recently reported that its assets in the US Waters in the Gulf of Mexico are showing great promise and should help the company rebound after its worst full-year results. Indeed, the energy giant has reported $6.7 billion in annual profit, but also said that capital restraints have pushed them to sell their shale assets.

The Melbourne, Australia-based company is the largest miner in the world, but last year posted $6.4 billion in losses through June. According to CEO Andrew Mackenzie the company’s free cash flow rang in at $12.6 billion, which is the second-highest on record; and gains from net productivity, he said, came in from a “simpler portfolio.”

BHP Billiton had originally expected for onshore U.S. production to decline on the development of new activity that that would not be able to offset lower natural deposits.

As such, the firm now advises: “As part of our ongoing review of our portfolio, the board and management have determined that our Onshore US assets are non-core and options to exit these assets are being actively pursued. We are examining multiple alternatives but will only divest for value.”

Also, in a statement, the company said: “We have determined that our onshore U.S. assets are non-core and we are actively pursuing options to exit these assets for value. In the meantime, we will complete well trials, acreage swaps and assess mid-stream solutions to increase the value, profitability, and marketability of our acreage.”

Looking at another metric, Earnings Before Interest, Taxes, Depreciation, and Amoritization (EBITA) rose by $8 billion, up from $12.3 last year to $20.3 in the latest fiscal year. This helped reduce the company’s debt by $10 billion; it is now at $16.3 billion. In addition, Capital and exploration expenditures fell 32 percent; it is now at $5.2 billion.

With that, shares of BHP grew more than 1 percent—to 20.04 AUD (approximately $20.67 USD) in the early morning trading market in Australia, on the heels of the results.

BHP chief executive Andrew Mackenzie described these results as “very strong.” He continues, “This strong momentum will be carried into the 2018 financial year, with volume growth of 7 percent and further productivity gains expected.”

He goes on to say, “Our relentless focus on cash flow, capital discipline and value creation should allow us to significantly increase our return on capital by the 2022 financial year.”

About The Author

Liam is a personal finance specialist from Chicago. He co-owns an accounting firm; Curtis & Sons Associates together his wife Amy Robinson Curtis. He is also a major contributor in top finance journals such as Forbes, Investopedia, Washington Times, Business Insider among others. He has been featured in many interviews in several broadcast stations to talk about personal finance management issues.